IDFC Bank logs in Rs 242 cr net, to focus on growing PSL book

Newest private sector lender IDFC Bank today posted a net profit of Rs 242.16 crore for the December quarter, and said it will focus on expanding its priority sector lending book.
The bank, which began operations on October 21 last year, saw a net interest income of Rs 404 crore and a non-interest income of Rs 200 crore, which included Rs 170 crore in treasury gains.
Its loan book grew 3 per cent during the reporting quarter, and the bank said it remains cautious about the asset growth given the macro headwinds, especially in its legacy infra sector.
The bank, which was formed out of a demerger from infra lender IDFC, started with a balance sheet of Rs 75,000 crore that has now grown to Rs 85,500 crore.

Its loan book stood at Rs 43,000 crore, while the fixed income investments were at Rs 34,000 crore as against the statutory liquidity ratio requirement of only Rs 11,000 crore.
On the asset quality, its Managing Director and Chief Executive Rajiv Lall said there were no slippages during the fiscal and the bank has been able to maintain the provision buffer drawn from IDFC at Rs 4,500 crore.

He said the gross non-performing assets ratio, which stood at 3.09 per cent as of December, may go up in the future but it will not hurt its bottomline as those assets have been provided for on a pro-active basis.

Moreover, he said that there is a need to look at the asset quality stress on a consolidated basis, including the quantum of restructured assets, rather than only the GNPA number.
Lall said the bank has picked up a stake in a north-east
focussed micro lender and will also be launching a mortgage product in the next six months.
Its Chief Financial Officer Sunil Kakar said that even after these efforts, its loan book will be able to meet only up to 20 per cent of the PSL requirements and the bank will depend on market instruments like securitisation for the remaining 80 per cent requirement.

It can be noted that every lender is supposed to lend 40 per cent of its advances to sectors identified as priority, failing which the money goes into the low-yielding rural infrastructure development fund.
On the margins front, Kakar said it had a net interest margin of 2 per cent on an overall basis, while on a net basis going only by loans, it stood at 3.2 per cent.
Lall said there is a significant pressure on the margins from the legacy infra loans book amid the reducing interest rate environment and efforts are on to decrease the reliance on it.

Its total branch strength is at 36 at present, including 27 in rural Madhya Pradesh, while the rest are in top-eight metros.
Lall said the cost to income ratio stood at 35 per cent and it will go up as it expands the network, but eventually, the bank wishes to stabilise it at 35 per cent.
Amid speculation that the bank may acquire British lender RBS' Indian retail operations, Lall said the priority for IDFC Bank is to grow its businesses organically but it is opportunist and will not shy-off from a good deal.
Its overall capital adequacy ratio stood at 20.3 per cent with the core tier-I at 19.63 per cent.

The bank's scrip grew 6.20 per cent to close at Rs 50.55 apiece on the BSE, whose benchmark Sensex ended flat.